Where dividends look secure, demand has pushed prices up – so the yield on newly invested money has gone down. With the backdrop for shares uncertain, most investors would be content to know merely that their modest income will be maintained and their capital protected from losses.

Unfortunately, such assurances never exist in the stock market. There is, however, a way to achieve these things from investing in companies: by lending to them via bonds, rather than buying a stake in them through shares.

What are the benefits of investing in alternative investments? Are these investment mainly for high net-worth individuals?

Alternative investments can serve different roles in a portfolio, either return enhancers or risk reducers. Some investments, such as private equity and venture capital, have high expected returns. Allocating assets to these return-enhancing investments increase the expected return on the portfolio. Most other alternative investments, such as commodities or hedge funds, serve roles as diversifiers in a portfolio. That is, the return to commodity investments are driven by different risk factors than are stocks and bonds, where stocks and bonds may be negatively affected by inflation while commodities can benefit during times of increased inflation.

What are the benefits of investing in alternative investments? Are these investment mainly for high net-worth individuals?

Alternative investments can serve different roles in a portfolio, either return enhancers or risk reducers. Some investments, such as private equity and venture capital, have high expected returns. Allocating assets to these return-enhancing investments increase the expected return on the portfolio. Most other alternative investments, such as commodities or hedge funds, serve roles as diversifiers in a portfolio. That is, the return to commodity investments are driven by different risk factors than are stocks and bonds, where stocks and bonds may be negatively affected by inflation while commodities can benefit during times of increased inflation.

Portfolio advisers have been looking at equity market valuations rather nervously for some time, tilting towards less risky assets, taking profits and holding more cash.

But has broader sentiment now caught up?

The UK’s Investment Association (IA) statistics for May show £230m ($296m, €260m) was invested in the IA Sterling Strategic Bond sector, while UK equity funds experienced a net retail outflow of £479m. The UK All Companies sector saw outflows of £532.1m, while UK equity income lost £23.1m.

Nexus IFA director Kerry Nelson says this could signal a shift from equities to bonds.

http://enterpriseuk.co.uk/wp-content/uploads/2016/07/falling.jpg5001000Jacqui Weylerhttp://enterpriseuk.co.uk/wp-content/uploads/2017/06/EmtUK_FinancialEcosystem-300x98.pngJacqui Weyler2017-07-10 19:01:432017-07-10 19:01:43ANALYSIS: Is it the right time to be piling into bonds?

Interest rates remain close to historical lows, despite the global economy growing at a steady pace, and the search for yield is becoming more and more difficult.

Although the US Federal Reserve is in a tightening cycle, this remains gradual and the central banks of many other developed countries maintain accommodative monetary policies. The European Central Bank (ECB) has not yet provided details on its plan for exiting its quantitative easing programme. But leaked comments on tapering suggests modestly higher interest rates in the next two years as the economic situation continues to improve.

Meanwhile, the Bank of England is likely to be cautious on raising interest rates. It needs to balance inflation concerns and growth prospects against an uncertain background of Brexit negotiations and a minority Conservative government.

The weakness in the pound has spurred greater demand from foreign investors for UK debt securities, with “sterling tourists” hailing mainly from Europe, helping British companies sell bonds. The trend is a sign of how the dramatic depreciation in the pound since the UK voted to leave the EU has rippled across the country’s financial markets, with sales of sterling-denominated debt running at a much faster pace than last year. UK companies have dramatically increased their borrowing in sterling compared with 2016, when concerns over the EU referendum stymied issuance. Companies rated investment grade have sold £17.3bn of bonds so far in 2017, compared with £6.2bn over the same period last year, according to Lloyds data.

Investors in the U.K. bond market could see losses on their bond portfolios as the Bank of England continues to be behind the inflation curve, an investment officer told CNBC on Monday.

“I see a scenario where losses will be inflicted on bond portfolios like we’ve never seen in our time,” Christopher Peel, chief investment officer at Tavistock Investments, said Monday.

“Governments and corporations have been issuing longer and longer duration maturity debt which has made its way into the markets themselves. When you look at the gilt market going back at the end of 90s the average duration of the guilt mark was around six and a half years, now it’s around eleven. That’s a recipe for losses in the most conservative portfolios,” he said.